The old motto "Sell and Leave in May" may not be a great guideline for this year.
Analysts told BI that trade wars, tax policies and debt ceiling risks are seasonal norms.
In election years, it may often outperform the market.
In a market dominated by shocking headlines and policy whiplash, seasonal mottos like the old favorite “Sell in May” may need to be reconsidered.
After providing investors with unprecedented years, the pandemic, the highest inflation in four decades, is now a huge trade war, market strategists say seasonality has become more difficult to predict.
Ross Mayfield, an investment strategist at Baird Wealth, told Business Insider that I don’t think seasonal norms are as useful in such an uncertain policy environment. “The results of tariffs, trade wars, tax laws and debt ceilings will have more impact on earnings than seasonal models. ”
Before 2025 begins, it is obvious that this year’s deals may be close. Considering the annual Santa Rally failed to show in December, the S&P 500's early growth caused few declines in the month.
Meanwhile, in April, usually one of the best-performing months of the year, the S&P 500 fell 1.1% as tariff escalates volatility and investors fled the stocks.
LPL Financial said that "May and Sales" were realized and real in the 1776 range - which made investors remind investors that the summer months tend to be slow.
Since 1950, the mild gains for the six-month period between May and October were about 1.8%. This year, though, anyone speculates about what might happen in a trade war, potential recession and ongoing geopolitical conflict.
“In a benign environment, you want to see your positive seasonal trends, but especially after the last six weeks, who knows what we’re going to talk about.”
If there are high months in history failing this year, summer may also bring its own surprises.
“In the market, tariff uncertainty and monetary policy now have the right to make it rain or clouds turn into sunshine,” Adam Turnquist, chief technical strategist at LPL Financial, wrote in late April.
To be sure, there may be some positive catalysts in the “May Sell” window: Trade deals are no longer just conversations, and President Donald Trump’s promised pro-growth policy is expected to take center stage later this year.
But the risk of a recession will continue to be vaguely visible to investors, while other commentators warn that future trade deals have been priced and will not fuel more returns. In fact, Michael Brown, a senior research strategist at Pepperstone, advises investors to indeed listen to May's motto and sell it to the rally.
"Given trade uncertainty, downside economic growth risks, and given how recent relative calm seems to have put investors in some false sense of security, this is a tendency to speak to what's really going on this year," he wrote this month.
But in recent years, investors should be given more pauses before trusting the usual seasonal indicators.
Mayfield told BI that stocks performed better in the six months between May and October, returning 4.6% over the past 10 years. Over the past five years, this timeframe has achieved double-digit gains.
Given that late April triggered a market signal from super fans, this time it might be correct. Leuthold Group recently wrote that the Zweig Broadness Thrust metric measures widespread participation in the stock market, historically promoting the market through seasonal stagnation.
Meanwhile, data tracked by Ryan Detrick, chief market strategist at Carson Group, found that buying in May made more meaningful in recent years and the month of the election year was particularly strong, he wrote, an average increase of 1.6%.
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